Common ownership

Common ownership refers to the ownership of assets, such as stocks or property, by multiple individuals or entities. It can take various forms, including joint ownership, co-ownership, or ownership through shared investment funds.
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Updated on Jun 5, 2024
Reading time 4 minutes

3 key takeaways

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  • Common ownership involves multiple individuals or entities holding ownership stakes in the same asset or property.
  • It can occur through joint ownership, co-ownership, or investment in shared funds such as mutual funds or exchange-traded funds (ETFs).
  • Common ownership arrangements may lead to shared benefits, risks, and decision-making among the owners.

What is Common Ownership?

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Common ownership refers to the situation where two or more individuals or entities hold ownership rights in the same asset or property. This can include various types of assets, such as stocks, real estate, businesses, or investment funds. Common ownership arrangements can arise through joint ownership, where multiple parties share ownership rights in a specific asset, or co-ownership, where each owner holds a distinct but undivided interest in the asset. Additionally, common ownership can occur indirectly through investment in shared funds like mutual funds or ETFs, where investors pool their resources to collectively own a diversified portfolio of assets.

Importance of Common Ownership

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  • Diversification: Common ownership allows individuals to diversify their investment portfolios by spreading their ownership across multiple assets or securities.
  • Shared Benefits and Risks: Owners in common share in the benefits and risks associated with the ownership of the asset, including potential returns, dividends, and losses.
  • Collaborative Decision-Making: In certain common ownership arrangements, owners may collaborate and make collective decisions regarding the management, use, or disposition of the asset.
  • Economies of Scale: Common ownership through investment funds enables investors to benefit from economies of scale, such as lower transaction costs and access to professional management.

How Common Ownership works

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Common ownership can take various forms and operates based on the specific rights, responsibilities, and arrangements agreed upon by the owners. Here are some common examples:

Joint Ownership

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In joint ownership, two or more individuals or entities have legal ownership rights in the same asset. Each owner typically holds an undivided interest in the property, and their ownership shares are specified in legal documents like deeds or titles.

Co-Ownership

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Co-ownership involves multiple owners holding separate but undivided interests in the same asset. Each co-owner has the right to use and enjoy the property, and their ownership shares are not physically divided but are conceptually distinct.

Investment Funds

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Common ownership can also occur indirectly through investment in shared funds such as mutual funds, ETFs, or hedge funds. Investors pool their money into these funds, which are managed by professional fund managers who invest in diversified portfolios of assets on behalf of the investors.

Examples of Common Ownership

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  • Jointly Owned Property: Two siblings inherit a family home and become joint owners, sharing ownership rights and responsibilities.
  • Co-Owned Business: Several partners form a partnership to jointly own and operate a business, sharing profits, losses, and decision-making authority.
  • Mutual Fund Investment: Investors purchase shares of a mutual fund, collectively owning a diversified portfolio of stocks, bonds, or other securities managed by the fund.

Real-world Application

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  • Real Estate Investments: Investors pool their resources to jointly purchase and own commercial properties or rental properties, sharing rental income and property appreciation.
  • Stock Market Investments: Individual investors invest in mutual funds or ETFs to gain exposure to diversified portfolios of stocks, benefiting from professional management and risk diversification.
  • Family Ownership Structures: Family members jointly own and manage family businesses or assets, preserving wealth and fostering intergenerational collaboration and stewardship.

Sources & references

Arti

Arti

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Arti is a specialized AI Financial Assistant at Invezz, created to support the editorial team. He leverages both AI and the Invezz.com knowledge base, understands over 100,000 Invezz related data points, has read every piece of research, news and guidance we\'ve ever produced, and is trained to never make up new...